Aug 12 – The August WASDE is Finally Here

Grain prices this morning are mostly in the red ahead of the August WASDE report being released later today at 11AM CST.

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Aug 12 – The August WASDE is Finally Here

For the past month, we’ve been talking about the upcoming August WASDE, weather, and the trade war non-stop. At least for one of those things we can stop speculating about. Grain prices this morning are mostly in the red ahead of the August WASDE report being released later today at 11AM CST. Here’s how grain prices performed last week.

Weekly performance of futures grain prices for the week ending August 9, 2019

Part of the rally in Chicago wheat prices this week was some downgrades to production in Europe and the Black Sea. For the latter, central areas of Russia have received 3-6x their normal precipitation for this time of year. [1] The moisture would usually be appreciated except that Russian farmers are literally in the middle of their wheat harvest! Accordingly, quality and quantity concerns are building for the wheat harvest, and accordingly, production estimates for the Black Sea country are dropping. [2]

SovEcon estimates that “Russia’s wheat crop issues are not big enough to impress the market” and so prices have fallen a bit, sitting at a FOB port price for 12% protein of $204 USD/MT (or $5.55 USD or $7.35 CAD/bushel if converting metric tonnes into bushels). Comparably, the U.S. Wheat Associates points out the Gulf of Mexico FOB port price for U.S. HRW wheat at $205 USD/MT for September delivery. [3]

Last week we talked about some of the recent, deeper issues of the trade war between the U.S. and China. On the trade war front, there hasn’t been much to update the market on but American President Trump has suggested that he’s fine if they call off the trade talks in September since they feel China isn’t coming to the table all that much. [4] Here’s a really good recap of the trade war timeline by the Peterson Institute for International Economics. [5]

The August WASDE Report is Here

In Friday’s FarmLead Breakfast Brief, we touched on what was to be expected in today’s WASDE report. In that column, I mentioned I’m looking first at acreage numbers, and then second, I’m looking at yields. Just to round it out, I’ll care about demand next and then, intuitively, ending stocks.

Gro Intelligence put together some great research last week and noted that price movements on WASDE days are, on average, 33% greater than other trading days. [6] Further, the August WASDE tends to follow only January and October ASDE reports as the third-largest market mover when it comes to the monthly publication from the USDA. They also note that “Since 2010, the July WASDE yield forecast averaged a 7.7-bushel-per-acre difference from the final yield, the August WASDE averaged a 4-bushel-per-acre difference, and September averaged a 3.1-bushel-per-acre difference.”

The problem with this year’s August WASDE though is that it won’t include the first Objective Yield Survey from the USDA for corn and soybeans. Instead, that data won’t be released until the September WASDE report. Thus, while we’re finally getting some decent acreage numbers, we know that the soybean and corn yields will still be questionable. As a reminder from Friday’s FarmLead Breakfast Brief, here’s a look at the pre-report estimates for today’s August WASDE, out at 11AM CST.

Pre-report estimates for August WASDE report, set to be released by the USDA at 11AM EST on Monday, August 12th

African Swine Fever & Soybean Prices

Ahead of today’s August WASDE, China’s agriculture ministry lowered its estimate for their 2018/19 soybean imports by 1.5 MMT to 83.5 MMT. [7] Also worth noting is that China has plans to remove import quotas on vegetable oils, including soy oil and canola oil. [8] it’s unlikely that today’s August WASDE report will provide some insights around increasing vegetable oil imports by the Chinese, but I’ll certainly be watching for any updates on soybean exports.

While we certainly know there are feedstuff demand issues in China, thanks to the African Swine Fever virus decimating pig populations, the reality is that the People’s Republic isn’t the only country dealing with it. Concretely, the ASF virus has now shown up in Russia, Moldova, Slovakia, and Bulgaria (not to mention various Asian nations). For Bulgaria, they’ve already culled 130,000 pigs, which is significant considering the industry is based on a 600,000-pig breeding herd. [9]

FocusEconomics notes that soybean prices “should rise going forward on prospects of downbeat supply, though the trade war should limit upward momentum.” [10] The forecasting group expects 4Q2019 soybean prices to average a couple of pennies under $9 USD/bushel on the futures board in Chicago, while 4Q2020 prices should climb to $9.30.

Overall, today’s August WASDE will create some sparks and price volatility in the grain markets. To reiterate, I’m watching for (in this order), acres, yields, demand, and then ending stocks.

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

Due to some travel, no futures grain prices are in this morning’s FarmLead Breakfast Brief, but you can review them here yourself!

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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